Monday, January 4, 2010

148) China's Policy Responses to the Global Financial Crisis

China's Policy Responses to the Global Financial Crisis
Yongding Yu
Journal of Globalization and Development
Volume 1 / Issue 1 (January 2010), p. 24-
DOI: 10.2202/1948-1837.1044
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China’s Basic Situation since the Global Financial Crisis
The global financial crisis has hit China quite severely. There was no decoupling as some expected. In 2007, China’s GDP growth rate was 13 percent. In 2008 China’s GDP growth was falling gradually at first, and then after the Lehman Brothers fiasco, it fell in a dramatic fashion. In the first half of 2008, China was still able to manage an annual growth rate of 10.4%. In the third quarter and fourth quarter, the rate fell to 9% and 6.8%, respectively. In the first quarter of 2009, the growth rate fell further to 6.1%. With hindsight, the turning point of China’s growth trajectory happened in September of 2008, and was closely related with the global situation after the Lehman Brothers bankruptcy. The monthly figures of the growth rate of industrial products reflect better the change of fortune of the economy. China’s growth rate of industrial products was 14.7% and 11.4% in August and September of 2008, respectively. It dropped to 8.2% and 5.4% in October and November in the same year, respectively. In February 2008, China’s inflation hit 8.7%, a record high in more than a decade. However, deflation replaced inflation in a matter of few months time. China’s Consumer Price Index (CPI) year over year (YoY) is still
negative, but sequential CPI growth has turned positive.
Impacts of the Global Financial Crisis on the Chinese economy The global financial crisis hit China via mainly the following four channels:
• Direct losses in the American capital market
• Reversal in cross-border capital flows
• Reduction in growth of exports
• Capital losses in foreign exchange reserves

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